Renren Inc., one of the largest real-name social networking services in China that listed in NYSE (RENN) couple months ago announced buying video site 56.com for $ 80 million in cash. After the acquisition, which is expected to be completed in the fourth quarter of 2011, 56.com will become a wholly-owned subsidiary of Renren.
Founded in 2005 by NetEase veteran Zhou Juan, 56.com now stands alone among Chinese video sites that whipped themselves into a state of frenzy to bleed money for copyrighted contents as evidenced by 1000 Times increase in quality video costs compared to 5 years ago.
Maybe that’s one of the main causes why Renren snagged up 56.com. Joe Chen, Chairman and Chief Exec of Renren commented that user uploaded videos have been increasingly popular amongst SNS users as an extensions of communication and content sharing. Acquiring 56.com will help Renren further meet user needs of sharing their lives through video. He believes that 56.com’s consistent focus on providing video sharing services versus professional content has resulted in a strong following of UGC-centric users, which complements Renren user’s social behavior.
Also, Zhou Juan will join Renren’s management team as Vice President.
56.com has raised $ 30 million from Sequoia, Steamboat Ventures, Adobe, SIG and so on.
The Fallen Shall Rise Again?
For those who might not recollect, Joe Chen and his partner, Liu Jian are actually amongst the first batch of entrepreneurs who tried to do a Youtube in China. All the way back in 2006, Joe’s company Oak Pacific Interactive released a video clips sharing service UUME in a grand launch event. While at the same time, Gu Yongqiang just raised $ 300M to get started with Youku, which is also listed in NYSE (YOKU) now.
One month after its launch, UUME ranked 816 on Alexa. However, things didn’t fare well for UUME as Web 2.0 bubble bursted about a year later. UUME along with then classified site Renren was discontinued. Yep, you read that right. the domain name Renren.com was used to operate as a classified site several years ago before its transformation to the Chinese Facebook.
Though failed in his first foray, the aspiration for video site never faded from Joe’s heart and mind, I guess.
Who’s The Next?
China’s video sites can be boiled down to three groups. For group one, they’re listed independent video sites, including Youku.com, Tudou.com and Letv.com, to name a few. Qiyi.com (by Baidu), Sohu Video and Tencent Video fall under the second group with common trait of being owned or backed by giant internet companies. Group three is consist of minor players with small market share and mundane traffic, just like 56.com.
According to an AnalysysInternational analyst, those in the 3rd group are mostly like to be the next target to be acquired, for instance, hupo.tv, baomihua.com and so on.
It was a really pity for 56.com which used to be no.3 video sites after Tudou and Youku. One-month ban by authority was really disaster for the company.
But acquisition I think is a OK-exit if there is only little hope for IPO.